As we pass the half way point in 2012, a number of reports continue substantiate the idea of a affordable housing market is upon us.
Earlier this year the U.S. Department of Housing and Urban development said that homes are more affordable than they've been in 40 years, while the National Association of Home Builders recently stated that home affordability hit a 20-year high. The National Association of Realtors President Moe Veissi asserted that the "typical family has roughly double the income needed to purchase a median-priced home," something that's never happened since the NAR started keeping records.
Although interest rates are at a all time low, homes are more affordable, there are home buyers skeptical of purchasing due to the uncertainty surrounding the overall housing market.
The uncertainty about the housing market involves most wanting to wait until a specific date when home values will increase or knowing they have hit bottom. I am not sure anyone can pinpoint this date, so the uncertainty continues to keep many from purchasing a new home.
The housing market often moves in cycles, there are some factors to watch in this housing market such as home values rebounding. When the uncertainty surrounding the housing market slowly disappears and the market rebounds, homeownership will also once again transform the pride to profit for some through the sale of a home.
If you go back to the 1960s Lyndon Johnson stated “owning a home can increase responsibility and stake out a man’s place in his community…The man who owns a home has something to be proud of and reason to protect and preserve it.”
Here we are 50 years later with many reasons to buy a home now and the current market could almost ensure your home will appreciate. Along with homeownership comes property tax deductions, interest deductions and with lower interest rates you may be able to obtain a shorter term mortgage allowing you to own your home faster.
Historically home equity has been the largest single source of household wealth for most Americans, along with pride of ownership.
The challenge lies in obtaining a "Clear to Close" mortgage loan which has become a challenging undertaking in recent years for all types of borrowers and we should not expect that to change anytime soon.
It is predicted that lending standards will remain tight in 2012, but that doesn't mean you won't be able to obtain approval of a mortgage with an attractive low rate. As a borrower you need to understand the loan guidelines and prepare in advance which will improve the chances of obtaining a clear to close mortgage loan.
The best chance of securing a mortgage in 2012 will be to review and understand your credit, as having good credit is the key to obtaining a "Clear to Close" loan approval.
You need to obtain a copy of your credit scores and credit history from the three main credit reporting bureaus, then review carefully to make sure there are no errors or issues to resolve before applying. In the current lending market most lenders want to stay away from scores lower than 620.
Obtaining a mortgage pre-approval will help a home buyer choose which house to buy, since they will know how much a lender will finance for the purchase, along with the other costs associated with the transaction. Finding out what information the lender needs for the preapproval can help since it will be one less thing to worry about during the home buying process.
You do not always need to rely solely on your lender to tell you how much of a mortgage you qualify for and you do not always have to borrow the maximum amount. You need to consider your own budget, and always leave room for unexpected expenses that we all have.
There are countless online mortgage calculators that can assist you to determine and estimate your monthly mortgage payments, although remember these calculators do not always include taxes and insurance amounts. Also borrowers need consider points, closing costs and different types of loans, and it is best to get a couple estimates from mortgage banks and mortgage brokers before you decide which combination works for you.
It is best to start assembling your documents prior to talking with a loan officer, as there are some basic documents every lender will request when you apply for a mortgage.
If you have these documents readily available when you talk to a lender, the answers you receive from a qualified loan officer will be more accurate. You need to have your last two pay stubs, last two years of W-2s, income tax returns, credit explanations and bank statements.
It is best to have several copies of these documents and or save these documents in an electronic format, so you can easily resend them to another lender for a second opinion or if they happen to get missed placed in the process.
Once a potential home-buyer gathers all of the mortgage preapproval information to give to the lender, and obtains a pre-approval letter they can then focus on finding the right home.
After you select a lender and submit your mortgage application, be sure you quickly send in any documents requested during the approval process from your lender.
In a lot of cases buyers can delay the closing of the loan which could lead to a default in the purchase contract and potentially lose earnest money deposits. You need to know your purchase contract, milestone dates and the closing date, and follow up with the lender periodically until the loan is "Clear to Close".
Once your loan is approved your credit must stay the same until closing, as many lender pulls your credit during the application process and says you've been approved, although most lenders these days will pull your credit again before the loan closes.
So it is best not to apply for new credit cards or credit lines, pay your bills on time and do not close any accounts, do not finance a new car.
While you are deciding whether to buy a new home remember it may never get any cheaper than in 2012-2013. There are several housing experts are predicting that this year will be the last chance for bargain hunters to cash in on the best deals of the current weak housing market.
You also need to consider that home prices are down 34% nationally since 2006 and mortgage rates are at historic lows, making homes very affordable affordable -- but it most likely will not stay this way for much longer.
Stuart Hoffman, chief economist for PNC Financial Services said he expects home prices to flatten out by the third quarter and start climbing by next year.
Some other economists, like Trulia's Jed Kolko, expect home prices to pick up even more quickly. Trulia's data shows that the national average for asking prices already increased 1.4% in the first quarter of 2012, compared with the last three months of 2011.
In addition to home prices, mortgages could also move higher as mortgage rates have been at or near historic lows for much of the past six months. The average interest rate for a 30-year, fixed-rate mortgage has not topped 4.5% since July 2011 and recently hit 3.84%, a new low.
But rates aren't expected to remain at these record-low levels much longer. As the economy continues to recover, rates will move higher, said Doug Lebda, CEO of LendingTree, the online lending site. Although, he said, they will "stay very reasonable."
The Mortgage Bankers Association is forecasting that the 30-year fixed will hit 4.5% by the end of the year.
Also know that today all Mortgage Origination needs to be in compliance with Federal and State laws and mortgage fraud tends to migrate geographically to take advantage of local market conditions. In most mortgage fraud cases today there are four type-specific schemes that can involve, property valuation, identity, occupancy and employment/Income.
One of the most difficult aspects of dealing with mortgage fraud is that it is hard to know the scope of the problem. The human element that is involved makes would-be fraudsters hard to spot, and those already committing fraud even harder to identify.
Because these people are white-collar criminals, they look, dress, act, and talk just like the rest of us.
They won’t look like criminals, they’ll look like loan officers, real estate agents, members of management and loan processors or closers and, of course, the next door neighbor.
We must be vigilant against fraud, recognizing its signs and taking proactive, definite, and realistic steps to not only prevent it but also punish it.
It starts with me.
It starts with you.
It starts with us…
If you have questions or need to know if you are dealing with a ethical or reputable lender, send an e-mail and I will attempt to assist you in the order the e-mails are received.
By Michael S. Richardson
michael@preventmortgagefraud.com
Author of “An American Epidemic, Mortgage Fraud… a Serious Business"
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